Getting Financial Freedom by 35!

I know, its been a while. I apologise for getting too busy with life to not update this blog. Sometimes those ‘lazy days of summer’ aren’t that lazy. So here is the down and dirty for what we have done since the beginning of May.

1. My husband is back in school for a summer term taking Calc 2. This isn’t an easy course, especially since it has been a good 5-7 years since he took calc 1. I was trying to help him out, but I sort of think he is just trying to pass at this point.

2. The back to school means we sunk $600+ dollars into two months of torture. We put it on the credit card, but just for the rewards. I have already made a payment toward the card, and we will pay the rest when we get our statement.

3. A few weeks ago while going to yard sales as a family, we ran into a guy who had some high efficiency windows for sale in his garage. He had them left over from a remodel project and had been trying to get rid of them for a while, so they were only $400 for three of them. We measured our windows, and determined that even though we could get a tax break by buying new, these were of a higher quality and nicer windows than what we will end up getting for the rest of the house. Now we are just waiting for August when there is no more Calculus, and before the fall semester of school starts to replace our windows. I am looking forward to the end product, but not the process. It will be hot, and we will be replacing all the windows in our living room. We will be suffering without AC when that happens.

4. I gave away our old couch. It was one we got free off of Craigslist, and at the time it seemed like a blessing. Its not that the blessing thing changed, but that couch was massive. Like you sit it next to a day bed, and that couch wins for sheer bulk.

5. Thanks to giving away the old one, the last weekend of May we bought a new couch at the local furniture outlet. We have had some misgivings since the couch was obviously broken within a few weeks and the repair guy they sent did a quick fix that literally lasted for less time than it took him to make the repair. Luckily the store is good at keeping people happy, and after hearing it would be another 2 weeks before we could have someone come back and saying that wasn’t good enough they replaced the couch. That was a surprise. I was just hoping for a sooner repair date. But lets face it, when you spend hundreds of dollars buying a new piece of furniture and more than half of the time you have owned it, its has been waiting for repairs. You start hating that piece of furniture.

6. We did not double pay our mortgage for July. Its not that we can’t. Technically we can pay until the 5th with no additional fees, and we get paid again on the 4th. But, instead of doing the same as ‘floating a check’ we are just not paying extra. We get 2 paychecks in July instead of 2, so we will go back to the plan then. We might even pay more, but more likely we will finish off the HELOC and start putting and extra $200 (on top of double payments) toward the mortgage each month after that.

Yes, its absurd when you think about it. And, yes the interest rate is still lower then our fixed rate mortgage. But its rising slowly. And, it will be nice to have one less bill to pay every month, even if we won’t have any extra cash in our pockets.

So you see, we have spend a good $1500 in one time, randomish expenses this month. So, I feel justified to not double the mortgage until the August 1st payment. Also, none of these expenses, including school were bought on credit. That’s a pretty nice feeling.

While gas prices are much lower than they were last year at this time, they will of course rise again. Summer is also the traditional time for travel since children are out of school and inclement weather is far less common. So how are you going to save yourself money on your car? Here are a few easy tips to help you out.

Check your tire pressure

Tire pressure can greatly affect your mileage in your vehicle. If your tires has less air in them, more of the tire surface is touching the road. This means the engine works harder to move the car. While, having more of the tire touching the road may be good during poor weather conditions, it does decrease how far you can get on a tank of gas. Last weekend we checked our tire pressure after the check engine light went on. (For the car newbies, the check engine light can mean anything, but I knew it had been several months since adding air.) It was at 31mpg, and I like the pressure to be close to 40 in the summer. After filling the tire, the check engine light went off, and we noticed that our in town gas mileage increased by about 3mpg to a reasonable 24mpg. Last weekend we did some highway traveling for Mother’s Day and got about 33mpg for the trip.

Change Your Air Filter

Air filters are another simple maintence for your car that can affect engine effiency. It won’t necesarialy increase your mileage, but it will affect acceleration. A clogged filter will slow air from entering the eingine area, making you push on the gas pedle more to accelerate. While there is no tested increase in gas mileage, if you have to push harder on the gas to get anywhere, you will be using and wasting more gas. This also affect wear on your car engine.

Get a tune up

When you get a tune up on your car, they check your your spark plugs and throttle, as well as things like fuel and air filters. Proper maintenence can easily save you money in repairs as well as at the gas pump. Fuel filters are made to last $5000 miles or more depending on how dusty of an area you live in. If you drive on gravel roads often, tis a good idea to replace your fuel filter. Once they become completely clogged your car won’t start and that can mean a trip to the mechanic as well as a tow.

Get an oil change, and use the right oil

When you get an oil change, they replace the oil filter and remove al lthe old oil from your car. Oil is lubricant for the car’s engine. All those moving parts of your engine move smoothly thanks to oil. Also, check your manual and find out what kind of oil is best for your engine. Using 10W-30 if you car needs 5W-30 will make your car work harder and decrease your gas mileage.

Combine Trips, and shop early

If you run 3 errands and make threetrips from home for each of them, you are using more gas than you need to. I don’t like to do all my shopping in the one stop stores, but it can save your car some hard work. If you need to mail a package, and go to the grocery store, it might make sense to go to the grocery store that has postal capabilities. Even if you don’t choose to go to these stores, its helpful to time your errands properly. If I run errands early in the morning it can take half the time of later in the day. Lines are shorter, there is less (or no) traffic, and sales people are more helpful. Maybe its because they have just started work, or maybe its because they have less customers to assist. Some stores even do thier discount markdowns in the morning and you can find a larger selection of discounted items at 9am than at 9pm.

Last of all, Lighten the load

Keep your car light! If you went to the store and bought 200 lbs lf mulch for your yard and have it sitting in the car for the next week until you have time to put it down. Stop! You are effectively carrying around a large adult, or three kids in your car at all times. Even if you can’t put the mulch down immediately, out it in the garage, or on the porch. Also, if you usually carry sand or kitty litter in your trunk in the winter, take it out. Most parts of the country don’t have to worry about freak snow storms by mid may.

This is really a post about saving money on heat and cooling your home/apartment/mansion but since winter is on its way out, I will focus on the cooler part. No one, after all, likes to get sweaty right after taking a shower.

1. Open your windows.

This tip won’t help once its in the upper 90s, but for late spring when its just starting to get hot its great. If you can open windows across the house from each other you can great a significant cross breeze.

2. Turn your cieling fans to the Summer setting.

That means the blade turns in a counter clockwise direction and pushes air down. The hotter air will sit above the fan and not circulate. Did you know it will feel a good 5 degrees cooler under a ceiling fan? Some companies claim it can feel even cooler with ceiling fans. If you have ceiling fans in the rooms you use every day, you can set your thermostat warmer. Speaking of thermostats…

3. Install a programmable thermostat.

All you renters, I am sorry you don’t have this option (though if you ask your landlord they might install one for you). We installed a programmable thermostat in our house this last January. It only cost us about $40 (can’t remember the exact price) and we got at the local big box store. Our heating bill was much lower than last year, and we had a crawler/new walker on our hands. There is only so many times you can let your child crawl on the floor and come back to you with chilled hands and feet. Anyway, I figured if we could decrease our bills by $3.30 eah month we would pay for the thermostat by the end of the year. Even with a 11% rate hike by the utility company we saw a decreace in our overall bill.

4. Get thermal window treatments.

Our house came with some cheapo blinds, but if its not broke don’t fix it. Last fall I decided we needed curtains. Partly because the blinds had tiny holes in them so people could see in at night when our lights were on, and partly because winter of 07-08 we had a $160 heating bill one month, and I did not want to repeat that. Fall of 2008 I was on a mission. I sewed one curtain panel that I lined with polyester fabric, and after discovering I cannot sew a straight line, I decided to price curtains.

I went to the local box store and looked at what they had and decided on some thick fabric curtains. Then when we were going to leave I noticed they had some curtains at the end of the aisle marked clearance. Of course the discounted price drew me in and I started putting my initial choice back on the shelf. Among the marked down drapes were a set of thermal lined curtains in a shade that would go nicely with my living room. After fruther incestigation I found the same drapes on the shelf for twice the price! These drapes had been returned and the store just marked them down to sell them fast.

The rest of the thermal curtains in our house were bought one window / room at a time. Its made the drafty windows feel less drafty.

5. Can I get some caulk?

After living the winter with a blanket literally nailed up covering our fireplace all winter, I found out about cement caulk / furnace caulk. It typically comes in black and its meant to go between the doors and the black fireplace. And I thought it would require hiring a professional to take out the fireplace door/cover thingy and putting in more insulation. Now, I just need to spend my $10 and get some.

Around the fireplace cover isn’t the only place where caulk will help. Any place where there is an opening to the outside you shuld caulk. Around doors, windows, trim on the outside and inside. If there is a crack, chances are caulking it wold be a good idea. We did some major caulking and sealing of holes last year after discovering a mouse got in and had babies. Spring is a good time to check the old caulk and if its cracked or separating, replace it. There is nothing worse than ants in the springtime.

6. Upgrade your windows.

This isn’t for everyone, in fact its not something you can do anything about if you aren’t an owner. Its also quite pricey. I priced windows and supplies and to replace the 6 windows in our home it will cost about $1000 for supplies. While part of that is tax deductible (supplies only because the windows are energy star rated), its a huge project. Especially the two windows in the upstairs. That will require assistance, and possibly borrowed or rented scaffolding. If we paid someone to do it, even just the two windows on the second floor, it will increase the cost significantly. Still, the new vinyl windows are leaps and bounds above the 30 year old metal framed with poor seals that are currently in place.

Thoughts

So there you go. Some things are simple, raising the thermostat two degree, turning on a fan, or opening some windows; others will cost thousands of dollars and some hard work. Try doing at least one of these and see if you can save money keeping cool this summer.

Today I was scheduling our house payment. I am proud to report that we are currently doubling our monthly payment in an attempt to pay off our house faster. But, as I was looking at things I got stumped.

Then I got sort of annoyed. You see, starting this year our escrow account requires a ‘reserve.’ I don’t know if this is standard, but its about 30% of what we will be paying for the year to house taxes and insurance. Thats fine and dandy, but I noticed that even though I gave them an extra few hundred dollars last month to help meet this reserve, its not reflected in the escrow analysis.

I also noticed that even though the city has claimed out house has dropped in value by about 5 percent, the property taxes are increasing by about that much.

In a time when Americans are feeling the squeeze of overspending and not enough jobs, why does inflation continue to rise? I haven’t noticed any new programs around town, in fact most programs are losing funding, so I don’t understand why they feel its right to tax me more. I was also sort of annoyed that the tax value had decreased, until I noticed the appraiser’s job is up for grabs. Looks like the county appraiser in podunk Kansas makes about 70K a year (its a little more than double the average household income for the county. (the majority of residents are single, the average male income is 33K and female 19K)

So moral of the story, if the housing market crashes get a job as the local appraiser. You will be set.

Of course the whole property tax thing has me a bit perplexed anyway. I don’t understand of the taxes paid in April are for 2008 or 2009. I am aware that on the valuation notices they have a disclaimer saying it doesn’t matter what they value your property at, they can make you pay whatever they want. So yeah, confusing times. I will write another post if I figure it out.

When thinking of your financial future you probably think of money coming in, investments made, even home ownership. Rarely do people think of their marriage.

Marriage is a great institution, but sometimes your life situation will change but the people in the marriage do not change – or they do, but not for the better. Unfortunately, this is when people begin thinking divorce.

How does a divorce affect your financial future?

Well, that all depends on your financial situation. If you have no children and no assets a divorce is as simple as contacting two attorneys and filing in court. For less than $500, wham bam thank you ma’am, you are divorced.

For most people its not that simple. Or remotely inexpensive.

Love is grand, divorce is Twenty-Grand. That’s right, the average THRIFTY divorce costs $20,000, and this is just the immediate cost. The government spends and average of $30,000 for every divorce. Public assistance programs (like food stamps and subsidized housing) are largely affected by divorce. All in all, it depends on what is going on with your life. Many attorneys will quote an average in the 40 and 50 thousand dollar range.

What are some of the areas effected?

1. Income Obviously your income (as a household) will change. If you were a 1 income family, both spouses will most likely need to work. Even if you are a two income family, living expenses will increase. Even with child support or alimony your entire life and budget will be changing.

2. Housing I know some people that continue to live together after they are divorced, but honestly I can’t imagine enjoying that. If you have a home that both partners own, it will likely need to be sold. Many times, homes in these situations are sold for less than their value just to have them sell quickly. Even if the home sells quickly and for a profit, quite often you will see a housing downgrade and move from that nice 4 bedroom to a 2 bedroom apartment and taking laundry down to the corner.

3. Taxes I am not going to go into the tax implications, but trust me they are complicated. 401Ks and IRAs may need to be divided, or heaven forbid cashed out. Taxes and penalties can take away large portions of your retirement. Its best to speak with a CPA so you can lose the least amount of money.

4. Your credit score One nice advantage in a marriage is that you can boost each other’s credit scores. With a divorce, you could see yours drop. If joint assets, like a home, is given to one partner, it can still affect the other partner. You might find out, you can’t get a car loan because your debt ratio is too high. If the partner keeping the house, can’t keep up on payments and get behind on payments it can effect you as well.

5. Wills and Insurance If you are divorced you will most likely want to change your beneficiaries. Even if you keep your beneficiaries, additional term life insurace might be a good idea. If I got a divorce and died, who would take care of my children? Whether or not you get custody of the kids, this is something you should consider.

Have you tried marriage counseling?

All in all, if you are in tough times with your marriage, you might want to consider your options. Marriage counselors cost about $100/session and will see you once a week for three months. For $1200 you could save your marriage. Family counseling does tend to work faster than individual counseling, which will boil down to less cost for you. Even if you were in marriage counseling for two years, it would only cost $10,000 dollars or half the price of a thrifty divorce. There are also other added benefits of a marriage staying together.

If you are in hard economic times yourself, look to your local church or synagogue. Many religious organizations offer free counseling, and there may be local groups that offer sliding scale fees. That means, if your marriage is on the rocks because you lsot your job, you can still get help. Also look into support groups. They tend to be low cost or free and can help you get friendship and support outside of your weekly couseling session.

Where did they come from?

These days it seems like everyone takes credit cards: grocery stores, restaurants, even gas pumps. But where did they come from? Well the first plastic was the Diners Card. The Diners Card made it so you could eat at one of 27 New York restaurants and not have to pay, until the end of the month. The card didn’t allow people to carry a balance though, meaning it was actually a charge card. The Diners Card was aimed at the well off and traveling businessmen.

American Express and Bank of America (VISA) issues their own cards in the late 50s.

Credit cards gained federal regulation in the 70s with additional and modified laws as time progressed. Before that some credit cards would send active cards out in mass mailings. Talk about identity theft!

What are the requirements to get a card?

In this day and age, anyone over the age of 18 with some source of income can get a credit card. If you go over to creditcards.com you view all sorts of cards for all sorts of people. Since everyone is different, many credit card companies have cards for certain groups.

College students can get cards with specific rewards for purchases at bookstores or restaurants. Another, great option for the financial infants: prepaid cards.

People with longer credit histories, and high credit scores can expect the greatest and best perks. Lower interest rates, bigger rewards, etc. Its all based on your amount of risk to the credit company.

Prepaid cards

Benefits:

These are similar to a bank debit card, you have to have money to spend money.

You generally don’t need a credit history, and if you have a poor credit history you can still get one of these cards.

Most of them will give you perks for direct deposit of your paycheck or “government funds” and allow you to withdraw your money and ATM for no fee.

They build your credit.

A few will even pay you (via interest) to use their card.

The cons:

Most cards have a balance limit ($5000 or $10000 dollars).

Many cards have weekly or monthly fees. (That means its not useful for an ’emergency’ card or backup card. Its meant to be used for day to day purchases.)

Many want you to have direct deposit or pay additional fees.

Rewards Cards

These cards allow you to earn ‘points’ or “miles.” You can turn the points in for gift cards or merchandise and the miles are used for buying plane tickets. Other rewards cards will have large annual fees but allow access to travel lounges in airports, or concierge service and other benefits at hotels. Depending on your circumstances you can find a card that will benefit you. Most people may not need special concierge service, but may enjoy earning a free plane ticket. Most cards will focus on a certain area that you can earn extra rewards like travel purchases, retail purchases, and even certain on-line retailers.

A sub category of the rewards cards are the cash back cards. They will give you back a certain percentage of your purchases in cash (sometimes they are rewarded as points and you turn in points for cash).

Many retailers offer rewards cards either saving you at the POS (initial purchase) or with cash back.

Other cards:

Other companies offer particularly low interest rates for purchases or balance transfers. If you have credit card debt at a really high percentage rate and cannot get the credit card to lower your interest rate, you may want to look into a balance transfer credit card. A balance transfer will usually involve a fee (say 3%) and then have a different interest rate than for new purchases. Occasionally you can find a card that offers no interest on balance transfers for 12 months or more. If you are working on paying off debt, a balance transfer could boost your repayment. If the card adds on 3% to transfer the card, and then you don’t pay interest for a year, that’s effectively like paying 3% interest for a year. I have yet to see a credit card offer that as an APR (except for specials where you get0% interest).

They aren’t all bad

I don’t think people should all go out and get lots of credit cards, but they do have a place. Credit cards used responsibly can make your life easier.

We have a credit card, that we use for all of our household purchases. The company has a special program on their website that categorizes our purchases and shows how we spend each month in areas, as well as help us track spending over the year. Its not a substitute for a regular budget, but it does make it easy to say “we have spend 24% of our purchases on eating out this month, whoa Nellie.” Even if we have not made our other typical monthly purchases (gas, groceries, etc) it can stop us from grabbing a burger on the way home in order to not go over our budgeted $50 in our spending.

Contrary to what many Americans believe, a car is not vital.

In some places they are actually unnecessary. I remember talking with a classmate in high school, he was planning on going to college in California, and he knew that the high tuition prices would make it hard to have a car as well. He also knew he wouldn’t use the car much. The campus he was going to had a bus system, a grocery store, and housing. He knew it made more sense to rent a car for a weekend at $50/day than to pay for the upkeep of a car every day.

So how much does a car cost?

1. Insurance this can cost anywhere from a dollar a day (for collision only) and up to five dollars a day for full coverage. It may cost even more in other parts of the country and based on your risk, I am basing these numbers on my experience in the Midwest.

2. The price of the vehicle. Whether you buy your car outright, or buy something on payments you need to account for that price. New cars start at around $10,000 for the small models, while larger cars start in the $30,000 range. Even if you want a new car there are wide ranges in price. There is also the option of buying used (an option I fully support). A two year old car will retail for less than 50% of the new price. When we bought our2 year old car, it was about $8,000 from a private seller (we bought it spring of 2007 and it was an ’04 model). With all the car info they gave us, they had the invoice from the purchase of the car, and they had spent almost $30,000 for it when it was new with their extras. If you are buying a new car every two years, you should realize you are spending thousands of dollars for that. Trade in prices are nowhere near as good as selling to a private individual either. Also, remember that if you get a lien on your car you are paying extra money to the lender.

3. Vehicle repairs. All cars need maintenance, and some cars need repairs. Repairs are more common with older vehicles and vehicles with high miles because they have been used so much. Know when a repair is worth it. When I was younger (and more foolish) I bought a car from my brother for $400. He knew the breaks needed fixed, and told me it should cost a few hundred dollars. When I went in for repairs they told me it would be $1200. I repaired it, but it wasn’t the best decision as the clutch went out 3 months later. Know when a car is sucking money away from your budget.

4. Gasoline. Currently gas prices are rather low, they have been hovering around $1.90 for a few months, but that won’t last. Prices may stay this way for a few more weeks, months, or even years. You may find a car you like, but if it gets 10 miles to the gallon its not the best for commuting. If you are buying a truck for hauling things, do you need the large one, or will a smaller truck work just as well? Gasoline isn’t a one time purchase, and it may be worth it to buy a more expensive car to get better mileage.

So you still want a car?

Don’t forget your other options! Many places it makes more sense to use public transport. If you think 45 minutes if your time is too much when you could drive and get there in 20, don’t forget the other costs of a vehicle. How much is that 25 minutes worth to you? You can earn, what a few more dollars to drive.

Don’t forget your transit costs can be tax free. In Obama’s Economic Recovery plan, they have increased the amount of money you can put into a pre-tax ‘transit account.’ If your employer offers this, it can allow you to take the up to $230/month for train and bus passes. You won’t be seeing any special tax breaks for driving yourself to work, and you can probably buy passes for your other family members as well as yourself. Do your kids take transit to school? or to grandmas? They may have a less expensive monthly pass, but you can also get that $20 untaxed.

Its the green thing to do. So you hate that being ‘green’ is so trendy? Well keep this in mind, in my town the public buses run on a set schedule. Empty or full, they will drive from downtown to the movie theater to the hospital and even to work. That is a lot of wasted fuel if no one is on the bus except the driver.

You won’t be late. Buses may get behind schedule, but not by much. As long as you catch the bus you can expect to get to work at around the same time every day. And, its not just the poor working class that take the bus. In our town all of the buses hub at a location downtown. Parking downtown costs a lot, and can be hard to find. Its easier for the banker or merchant to take the bus than spend extra time and money finding parking.

So before you buy that second vehicle, or trade yours in for a new model, consider your options. You might just be glad you did.